People Who Lose Their Homes May End Up Owing IRS Tens Of Thousands

New York Times:

The 1099 shortfall, as it is called, stems from an Internal Revenue Service policy that treats forgiven debt of all types as income even if the taxpayer has nothing tangible to show for it, unless the debt is canceled through bankruptcy.

The Center for Responsible Lending expects that 20 percent of the home loans made in 2005 and 2006 to people with weak credit, commonly called subprime loans, will end in foreclosure. Because so little money was required as a down payment during the boom, the value of many of these houses may be less than what is owed.

Read the whole story: New York Times

Comments

[Sundialsvc4]

01:54 PM on 08/20/2007

Well, "all this ranting aside," there is a whole lot of rottenness throughout the financial markets and if you sift through the annual reports that are published every year by (pick any one) major national banks .. you will see things there that will make your head spin and your jaw drop (which is dammed uncomfortable when both happen at the same time). Banks, it will turn out, have been insolvent for many years.

There is only so much blood that you can exact from a turnip, even if you are the IRS. Eventually you will realize that, unless we all are to simply stop-working while the "guv'mint" borrows from itself enough money to feed us all, "the economy" is not a macro-economy but a micro. It is, in a word, you and me and about 320 million other people that are very much like you and me. Unless the financial prospects of hundreds of millions of essentially financially-powerless plebes are strong and viable, the entire economy will ultimately be neither strong nor viable.

Right now, the American consumer is being ripped off by just about every institution to which he had been taught to give either his money or his trust. That money has been stolen and that trust has been betrayed.

In less than sixty years, the economic strength of this, once the mightiest industrial nation in the world, has been so sapped that we grovel at the feet of the power-elite of Communist China, and pay homage and tribute to them. And ultimately, a nation like that .. whether it be large or small .. ceases to have any power at all. The men and women of the rest of the world simply move on without them. If the Government of the United States of America has finally demonstrated that it is unfit to rule, and economically bankrupt, the several-hundred other nations on this planet are certainly not going to follow it down into the sewer, nor wait for it to come back up.

Why should they?

[Defyant]

07:41 AM on 08/21/2007

Well said.

[blooddoc]

01:16 PM on 08/20/2007

Just one more reason to scrap this arcane and archaic thing called "The Tax Code." Replace it with taxes on consumption and a simpler, fairer income tax.

[falco]

12:25 PM on 08/20/2007

Gotta wonder about other laws that are new, like emminant domain. That will come into play when the new super highway is built. It will go from Mexico to Canada and will make it easier and cheaper for the Chinese to deliver their goods throughout America. Cheaper ports, cheaper labor (both Mexican)!! And Spain will collect the tolls!!

"Australian toll road giant Macquarie agreed Wednesday to purchase forty local newspapers, primarily in Texas and Oklahoma, for $80 million. Macquarie Bank is Australia's largest capital raising firm and has invested billions in purchasing roads in the US, Canada and UK. Most recently the company joined with Cintra Concesiones of Spain in a controversial 75-year lease of the 157-mile Indiana Toll Road," reports The Newspaper.com."

Can you stand it? They even have the nerve to buy the newspapers to control the outrage over the land grab!!!

And Europe boy, study your history. The European Rothschilds started the situation we are in and they and their spawned demons perpetuate it. Your country is not exempt, it's just that they want the US to fall first. We are armed and ornery. Go drink some tea and wait your turn - it could be a while...

[psk]

01:20 PM on 08/20/2007

You just got to love the sale of a "toll road" to another country. Just what does the local government get? A quick buck here and now. What does the local government lose? Control over its own roads, as well as tons in tax money in the long haul.

Why is it so many think of the fast buck? What's in it for me right now, rather than what is in our best interest over the long haul seems to be the way to go.

[Sundialsvc4]

12:22 PM on 08/20/2007

Inquiring minds would like to know how this theory works...

If your debt is forgiven AND YOU STILL CONTROL THE ASSET, then obviously you "made money."

But if you do NOT control the asset, then the sale was effectively rescinded .. the asset that you bought was "un-bought." You should owe nothing at all. You certainly did not "earn income."

[GTrollPatrol]

11:09 AM on 08/20/2007

all government is an outright fraud nowadays

reality is so foreign to your media-trained perceptions that you would flip out if you knew the whole truth

you all unknowingly hold the office of "person" and therefore are liable to all the local, state and federal government's insane rules and regulations under the "color of law"

[mrcontinental]

09:33 AM on 08/20/2007

The reforming of the bankruptcy laws should have been a wake up call but most ignored it because they figure that IT CAN NEVER HAPPEN TO THEM.

Bankruptcy has always been a small segment of the population, but just like after the great depression bankruptcy will be the norm for most after the coming collapse.

They knew this day was coming and they wanted to ensure that they could still keep THE MILLIONS that will be forced to file on the hook for the debts and enslaved for the rest of their lives. I cannot believe how trusting and naive you sheep are. You still don't get the ramifications of all the events that have taken place over the last 6 years but soon you will.

[RabidRightRebel]

10:00 AM on 08/20/2007

I saw it and decided to stay in my modest house and instead increase my savings and investment accounts. Should I and millions of other like me bail out everyone who bought a house they couldn't afford and continued to spend beyond their means? I don't think so!

If you want to live the life of a millionaire you have to be prepared to pay the bill.

[DavidGetsInvolved]

10:06 AM on 08/20/2007

"""...If you want to live the life of a millionaire you have to be prepared to pay the bill..."""


Well said.

[MajorKong]

11:25 AM on 08/20/2007

No, but I bet that you and I WILL pay to bail out the banks who loaned the money to the people who couldn't afford to pay it back.

I don't think a lot of these folks were "living like millionaires". In many parts of the country an average house in a relatively safe neighborhood costs upwards of $400,000.

I'm not talking McMansions here. The 1970s-vintage tract house I grew up in near Chicago would have sold for $400k before the prices starting going down.

[BOBONDE]

09:21 AM on 08/20/2007

THIS IS THE AMERICA THE CONSERVATIVES HAVE GIVEN US, TO FIX THIS MESS WE NEED TO GET BACK TO PRE-REAGAN TAX LEVELS FOR THE RICH AND BIG BUISNESS, NEO CON MOTTO: I GOT MINE AND TO HELL WITH EVERYONE ELSE.

[WilliePilgrim]

08:04 AM on 08/20/2007

There is a solution of sorts. We should collectively look at the idea of getting rid of our income based taxes and consider a consumption taxes, thereby encouraging a culture of saving (no taxes on income mean not taxes on the interest from saving, unlike now where we're actually encouraged not to save and punished for being successful at saving). Consumption taxes are tied to the protection and activity of the open marketplace that is the keystone in our economic and personal freedom. Make April 15th just another nice day in spring.

[Graywolf48]

10:32 AM on 08/20/2007

Where's the equity in that? How will that lead to saving? The average working class citizen will pay tax on every item they need to subsist, unless you exempt groceries, tuition, medical care, clothing, heating and cooling costs, etc. Do you want to tax items like prepared meals, new televisions and stereos, ipods, cars, boats, furniture etc? The wealthy can afford those taxes and will probably do even better than now. They'll buy the yachts and nice cars off-shore and avoid taxes. Will corporations be taxed on products and services they consume? Explain to me what is meant by your statement: "consumption taxes are tied to the protection and activity of the open marketplace"? What does that mean?

[vippy]

07:53 AM on 08/20/2007

What we need before raising taxes is an audit.
Each year the government makes a budget and it
wants more and more money. Yet they waste more and more and it just goes by the wayside. I know here on Ft Hood if a company has money left over they feel they have to use it all up otherwise they would get less next year so they
pave the road again even though they just had paved it. Makes no sense at all but it starts with the lower levels and then it baloons into the trillion dollar budget because of nonsense like that. And I see it everywhere.

[raker]

07:20 AM on 08/20/2007

And thanks to the corrupt new bankruptcy law, these people will be poor for the rest of their lives. As long as they keep voting for Jesus and against homos, ignoring their interests, the middle class is doomed.

[AKJM]

12:01 PM on 08/20/2007

They knew this was coming, how long ago did they rewrite the bankruptcy laws. Just think, you can’t get out of the debt plus you owe taxes; it’s called trickle-up.

[Nyk]

03:46 PM on 08/20/2007

exactly! I knew it was coming and I can't even do math.

[squareyellowpaper]

06:55 AM on 08/20/2007

More people are confronting foreclosure.

More people are unable to pay for their kids' college tuition.

Even more people can't keep up with the cost of prescriptions and doctor, hospital, and nursing home bills.

When I see kids as young as 10 carrying cell phones, I wonder what their parents' bill is each month.

No matter who becomes our next president, they will HAVE to raise federal taxes. Bush's war has put this country in a historically large debt. People don't understand that the federal government doesn't just print money as is needed......people have NO idea how the economy works...Heck, most can't get their personal finances in order.

[conservativeoriginalist]

09:27 AM on 08/20/2007

"People don't understand that the federal government doesn't just print money as is needed"

Um, they just did. Which cavity did you think the Federal Reserve pulled over $50B from to subsidize the banking industry?

"people have NO idea how the economy works"

If they did, all of this "universal ______" socialism talk wouldn't be so prominent. Socialism is for the ignorant and lazy.

"most can't get their personal finances in order."

Including our governments.

[FoundersFan]

11:24 AM on 08/20/2007

People know that when they run out of money they have to quit spending--they can't print more.

That is the common-sense lesson the government never learned from either party. The problem is not that taxes are too low--it is that spending is far, far too high.

Don't raise taxes--slash spending. It sounds as if you have no idea how people get their personal finances in order.

[Nyk]

03:45 PM on 08/20/2007

FoundersFan said:
"People know that when they run out of money they have to quit spending--they can't print more."

No, actually people today do not seem to know that when they run out of money they need to quit spending. They keep spending and spending and spending and going further and further into debt until they drown in it. How do you think we got into this mess?

[RabidRightRebel]

06:50 AM on 08/20/2007

With all the mindless rants about the evils of tax on this section you could mistake it for a rabid right propaganda site. The truth is that only countries that don't have taxes are dictatorships and in order to have a government small enough to “Drown in a bathtub”, it would have to be a dictatorship.
If that is what you tax haters want at least be honest enough to come out and say it.

For my part I am willing to pay my fair share of taxes and would never trade in the rule of law for the rule of money. That does not mean I don’t complain and question wasteful spending just that I am not foolish enough to believe in getting something for nothing.

As far as IRS bills on forgiven subprime loans go, my view is that they should consider themselves lucky, because it is me and millions of other people like me that are going to have to pay for their stupidity through higher lending rates on our homes.

[Defyant]

07:50 AM on 08/20/2007

Anti tax rant, you bet. I want accountability. I want real representation. I want to know that my vote does count. I want a government that works for me.

I am willing to pay fairly. What we have now is extortion. Did you see the list of taxes I posted? Have you read your phone bill? Jeez. I'm tired of being taxed out the ass because I'm still breathing.

I'm tired of government wasting money, throwing it down rat holes and then telling me taxes must go up. Well so does food, fuel, medical, housing, credit, insurance, the whole cost of living goes up.

Government never solves anything.Government doesn't work. It just gets bigger, and works less. I'm tired. If you had any sense, you'd be tired of it to.

[4peace]

08:17 AM on 08/20/2007

I'm tired of government wasting money, throwing it down rat holes and then telling me taxes must go up.

Personally I'm tired of my tax dollars being used to cause death and destruction around the world.

[RabidRightRebel]

09:38 AM on 08/20/2007

Fine you are tired of waste but lets look at your list of taxes. Do you really believe that there should not be:

Building Permit Fees
Because this service should be provided free?
Capital Gains Tax
Because only working people should pay tax?
Corporate Income Tax
Becasue only working people should pay tax?
Court Fines
Because there should be not fines for breaking the law?
CDL Licenses Fees
Because this service should be provided free?
Cigarette Tax
Cigarettes are so good for you they should be cheap?
Federal Income Tax
Who needs government?
Federal Unemployment Tax
Because you have enough money you don’t need to work?
Food License Tax
Because we don’t need to check restraunts?
Fuel permit tax
Because we don’t need to check service stations?
Gasoline Tax (42 cents per gallon)
Because driving a Mega SUV is our duty?
Inheritance Tax Interest expense
Because only working people should pay tax?
Inventory tax IRS Interest Charges
Because we don’t need to pay taxes on time?
IRS Penalties
Because tax evation should be made legal?
Local Income Tax
Who needs police?
Marriage License Tax
Because this service should be provided for free?
Medicare Tax
Because you have so much money you don’t need medicare?
Property Tax Who needs schools?
Service Charge Taxes
Because we should only tax prodcucts?
Social Security Tax Because you will work until you die?
Road Usage Taxes (Truckers) Who needs roads?
Sales Taxes
Who needs gevernment?
Road Toll Booth
Because you want to pay for roads you don’t use?
School Tax Who needs school?
State Income Tax
Who needs state police?
State Unemployment Tax
Because you have enough money you don’t need to work?
Toll Bridge Taxes
Because you want to pay for Alaskan Bridges to no where?
Toll Tunnel Taxes
Because you want to pay for Tunnels you don’t use?
Traffic Fines (indirect taxation)
Because there should be no penalty for speeding?
Vehicle Sales Tax
Because Cars are so special they should not be taxed?
Workers Compensation Tax
Because if you get hurt on the job you don’t want help?

[Graywolf48]

10:14 AM on 08/20/2007

Pay for whose stupidity, the borrower who was probably seduced into a loan with false promises and indecipherable small print, paying high points and interest rates that are usurious so they can live the American dream? Trying to afford shelter, that might cost less than decent rental housing, if such rental housing can be found? Those that may have gotten an affordable home only to end up with an unmanageable burden when their job is downsized or outsourced or a catastrophic illness strikes and pushes them over the edge?

Or do you mean the lenders stupidity, making loans to unqualified borrowers for quick upfront profits knowing they are in a win/win situation? The lender gets the fee and closing costs, prepaid interest and maybe months or years of payments (all the while equity in the property probably increases)knowing if default comes, they regain the property and get to resell it again, maybe at a higher price than before to maybe another marginal or unqualified borrower? Oh, they also get a tax break by writing off the paper "loss".

If you aren't being thoughtless and just venting your frustration about a very complex problem, then you're a creep with no compassion or understanding of the real world and how life can change in a moment from good to disaster. I hope your personal genius keeps you and your loved ones solvent. But if the worm ever turns remember to consider yourself "lucky" because now you have no home and your Uncle Sugar wants tax money on your loss. Meanwhile, the bankers just keep on truckin'.

[squareyellowpaper]

05:47 AM on 08/20/2007

The only "fair tax" is a flat 10% federal and a 5% State income tax across the board for individuals, couples, families, rich, working class, and corporations.

There should be NO exemptions and NO deductions. There should be no town, county, or municipal income taxes.

Personal property, business property, and real estate could still be taxed.

[HatingTheGame]

04:43 AM on 08/20/2007

Check out Biden's resume with some interesting facts http://www.nndb.com/people/023/000027939/

Regarding the 2005 Bankruptcy Law making it harder to declare Chapter 7 protection (http://money.cnn.com/2005/10/17/pf/debt/bankruptcy_law/index.htm):

Over his long career in politics, Biden's biggest financial supporter has been the giant credit card company MBNA, which was also one of George W. Bush's biggest donors in 2000 and 2004. His son, Hunter Biden, was hired as a management trainee at MBNA straight out of law school, and was quickly promoted to executive vice president. The younger Biden has since left MBNA to establish his own lawyer-and-lobbying firm, but still receives a $100,000 per year consulting fee from the bank, which has since been swallowed by Bank of America. In 2006, Hunter Biden was appointed by President Bush to a five-year term on the Amtrak Reform Board.

-- This is Hunter Biden, Joe's second son. The first son, Beau is Attorney General of Delaware, and the guy who recently said that he'll be going to Iraq. http://www.huffingtonpost.com/2007/08/16/bidens-son-to-go-to-iraq_n_60702.html

But going from Mail Room to Vice President, now that's a feat!

Also:

Biden was among those who called for an investigation into the security lapse that allowed a male prostitute with no journalistic credentials to attend Presidential press conferences under an assumed name, as Jeff Gannon, for two years. Later, however, Biden declined to sign on to the proposed inquiry, which never happened.

[HatingTheGame]

04:21 AM on 08/20/2007

History repeats itself for the poor sap that is the American consumer. At the end of the dot com bust, tons of people lost all of their money, and then were stuck with the Alternative Minimum Tax and ended up having to pay the IRS for years. All savings, 401K, and stocks poof...gone, and then stuck with a tax bill.

Here we are again. Suckered into loans we can't afford, then losing the house, and then stuck having to pay taxes.

In these cases the second time following tragedy is rarely farce -- its more tragedy. We are suckers to the core, and the monied make the dough (altho in this case the banks are suffering but they get bailed out always).

Also, I don't think people remember the 2005 Bankruptcy law that our fearless leader Biden pushed through on behalf of MBNA Bank (a Deleware corporation where Biden is from), which made going bankrupt more difficult.

Funny how that works huh. Hard to get bankruptcy protection, then screwed out of your house and savings, and then have to pay for the rest of your life -- like debtor's prison.

Seems like the banks somehow knew that they needed to be "protected" from the American consumer by suckering them into cheap loans they couldn't afford, and then make it impossible to get out.

The ruling elites of this country will continue to fuck us, and we'll continue to fall for it.

Welcome to post Industrial Amerikka.

We suck.

[covered]

06:28 AM on 08/20/2007

Finally. I thought I was the only one who had this situation sized up exactly the way you do, HTG. There were two big alarm bells that went off for me during this whole sorrid psychodrama. The first was Greenspan testifying that everyone should get an ARM loan on their house and the second was the new bankruptcy legislation written by the banks, for the banks and rubber stamped by all the repulicons and a few guilty dems, as well. I sold my house immediately. Best decision I ever made (and I really liked that house...a lot!) It really looks more and more like bush is TRYING to leave this country in smoking ruins. He obviously doesn't give a flying fuck.

[squareyellowpaper]

06:44 AM on 08/20/2007

No, the new bankruptcy laws put the screws to the working class and favor corporations.

Again, the Republicans came up with this plan prior to the formation of the "New" Democratic-controled congress.

Those in bankruptcy law were the only ones in the country crying, "Foul!"

Apathetic Americans, thinking that the government is always acting to protect them and their interests better wake up!

But, should a politician say, "No more taxes!" or "You get a rebate!" They gladly sell their vote for the promise never knowing how they paid for it in the end.

At this point, ANYONE who trusts the Republicans and the president to make decisions and pass legislation in their favor over big money interests, is just plain dumb.

[drkazmd65]

09:21 AM on 08/20/2007

Anybody that bothered paying attention when the 'Bankruptcy Bill' was going through got to hear the litany of 'deadbeat debtor' reasons that the Banks needed protection from.

The Circle Jerk of:

1) Offer easy credit to people that should know better than to get it, and that the Banks know are a risk.

2) Make sure to nail them throughout with high interest rates, made-up fees, and surcharges.

3) When they get behind in payments, jack up the interest rates, fees and surcharges even more to milk more money out of the saps.

4)Squeeze the suckers until they snap.

5) Use the money you squoze out of the suckers to by politicans and legislation that makes it harder to get out from under your thumb.

6) Repeat as needed.

And, our alleged 'representatives' go along for the ride,....

Yep,... it sucks

[DavidGetsInvolved]

10:03 AM on 08/20/2007

And then offer them $45,000 sign-up bonuses to join the miltary-industrial complex.

Great plan and so many people are falling fot it.

[FoundersFan]

11:19 AM on 08/20/2007

---I believe that banking institutions are more dangerous to our liberties than standing armies.---Thomas Jefferson.

T.J. once again wise far beyond his time. If only we had leaders such as Jefferson and Madison today.

One thing is certain--there would be NO indvidual income tax.